Despite falling investment in the continent, Chinese entrepreneurs, investors, and wanderers are digging in.
- By Huang HongxiangHuang Hongxiang is founder of the Nairobi-based China House Kenya., Xianshuang ZhangXianshuang Zhang has been working at China House since 2015, managing its educational program and working on wildlife and research projects., Zander RoundsZander Rounds is a former Fulbright fellow in China. Zander now manages China House’s research, focusing on the social impacts and consequences of Chinese investment in Kenya and beyond.
NAIROBI, KENYA — Jeff Kiarie was guarding a Chinese mine back in early 2014 near Arusha, Tanzania when Chinese managers and investors picked up and left, leaving their excavators, tractors, and wheel loaders behind, offering no explanation. “They couldn’t just leave so many machines here,” Kiarie, the lone Tanzanian now guarding thousands of tons of Chinese mining equipment, says he reasoned. But that’s exactly what seems to have happened; Kiarie’s mine remains abandoned, and other Chinese operations on the African continent seem to be in peril. For years, Western media has covered Chinese trade and investment with the continent somewhat breathlessly; a November 2006 New York Times report declared that Chinese development “looks more like Africa’s future than its past,” and a February 2011 article for the BBC proclaimed that “the Chinese are coming” to Africa. Now, with the recent drop in Chinese investment and trade with the continent, it might seem appropriate to declare that the Chinese are going. But as some are leaving, others are innovating, exploring, and digging in.
Since the turn of the 21st century, Chinese state-owned and private enterprises have poured into African countries, seeking natural resources, new markets, and other business opportunities. China’s trade with the continent has skyrocketed; in 2009, China surpassed the United States to become Africa’s largest trading partner, and by 2014 flows exceeded U.S. trade with the continent by more than $120 billion. These trends coincided with an explosion in optimism about Africa’s economic growth prospects.
But now with the slowdown in China’s economic growth — its GDP expanded 6.9 percent in 2015, down from 7.3 percent in 2014 and the lowest growth rate China has seen in 25 years — things are changing. China’s customs office recently reported that African exports to China in 2015 fell 38 percent from 2014. In November 2015, China’s Ministry of Commerce announced a 40 percent year-on-year plunge in investment to the continent, what the state-run English-language China Daily called a “collapse.” As the jumbo jet that is China’s economy slows — or worse, perhaps heads for a hard landing — some analysts believe the outlook for the African continent is bleak. South Africa’s plunging currency, the rand, is one recent manifestation of more pain to come.
In September and October 2015, as part of our work at China House, a Chinese-led social business which focuses on China-Africa issues, we spoke with investors, managers, employees, and wanderers of Chinese origin across several eastern and southern African nations including Kenya, Mozambique, Tanzania, and Zambia. What those people observed provides a mix of optimism and pessimism for Africa’s future. On one hand, as China’s previously insatiable appetite for oil, metals, and minerals wanes, African economies dependent on the export of commodities are hurting. The pain is evident in Tanzania’s once-booming copper mines. Tom Opila, the owner of a variety of mining concessions near the massive inland Lake Tanganyika bordering Tanzania, described how the international price of copper soared in 2010, spurring Chinese arrivals and a frenzy of investor activity. Opila jumped on the opportunity, jointly launching his first copper mining development project with a Chinese firm. Other Tanzanian businesspeople soon also set up investment projects to attract Chinese finance. But now, after shifts in the international market for copper and a series of fraud and quality issues at Chinese firms, the action has ground to a halt. “Later on they did not come any more, ” Opila muttered.
The phenomenon extends beyond the copper belts. We caught up with Zhang, a manager at a timber company, at his office just outside Lusaka, Zambia. (Zhang did not wish to give his full name because of perceived risks to his business.) Gazing out over haphazard stacks of rosewood logs, a commodity used primarily for furniture manufacturing in China that sells for between $1,500 to $15,000 per cubic meter — high-end specimens once sold for as much as $1.5 million per cubic meter — Zhang reminisced. “A few years ago, because of the economic boom, the demand for rosewood was very high,” he said. “And the price was very high.” High enough that it was still worth investing despite an onerous export regulation regime. “In a single month we used to export several containers…” Zhang trailed off, his silence preempting follow-up questions.
A thousand miles east, in Pemba, Mozambique, Liu — another Chinese national exporting timber who like Zhang did not want to give his full name — faced other problems on top of slowing demand. Suitable timber resources have become scarcer. “Now we have to go very far to find suitable trees to cut,” he said. As a result, “many companies have started to retreat or change [their] business,” pivoting away from traditional operations towards new business models and even new industries. As resource-driven business has become less lucrative, some Chinese investors and traders are indeed leaving Africa.
But not all are going. Opila and many other Tanzanians we met remain optimistic about the future, insisting the disappearance of Chinese investors and firms is temporary. A May 2015 press release from China’s Ministry of Commerce noted, “Despite the slowdown, positive progress has been made recently in a number of major investment projects in Africa. It is expected that investment growth will pick up again in the future.” Indeed, while new investment is down, many existing projects in Africa continue to operate and have long-term effects. And some of those we interviewed view low commodity prices as an opportunity. Liang Kaili, a Belgium-based Chinese businesswoman preparing to make moves in central Africa, told us, “The demand for mining is always going to be there — prices fluctuate; that’s normal.” She winked, then hinted at plans to scoop up low price copper supplies in the Democratic Republic of the Congo.
Others are betting that China has far from lost its appetite for resources, even if its economy is coming back to earth. Li, a copper mine operator in northern Tanzania who withheld his full name, is hunkering down as compatriots pack up. “Our copper refinery in China still needs raw material,” Li said. “So even though there is not much room to profit, we have to find the resources anyway.”
The outlook is more complicated for those involved in endeavors beyond trade or commodities. A simple look at Africa’s empty mining fields and timber yards — genuine symptoms of profound economic changes in China — risks missing the fact that further expansions and new projects across the African continent are also popping up. Chinese firms are still attempting to escape an increasingly saturated economic landscape. The go out or die mentality, or “strategic exit,” that motivated Chinese companies to seek opportunities beyond their borders throughout the 2000s, may even be intensified by slowing growth.
This notion certainly holds in Kenya, which is less resource-rich than many African nations. China’s waning appetite for commodities has not fazed Wang Haojie, who directs Kenya-based subsidiaries of a Chinese company called Lan Tian Investments, is responsible for the recently launched China-Africa Industrial Platform (CAIP) located on the outskirts of Nairobi. According to Wang, the massive new structure he’s helped erect will house an all-in-one showroom and warehouse for Chinese machinery imports, as well as a tech-training center.
Wang’s new Nairobi platform is a long way from Lan Tian’s home base in Heilongjiang province in northern China, and from the company’s original operational scope as a traditional construction outfit. Wang envisages the expansion as both a strategic response to a slowing and saturated Chinese marketplace, and as his duty. “Our company is undertaking the responsibility of our province by shifting extra production capacity abroad,” Wang said.
Africa also remains a land of promise for many entrepreneurs looking for new growth markets. At a gathering hosted by Kenya’s investment promotion authority in January 2016, Lu Yanqun, the director of the provincial department of commerce in China’s central Hubei province, enthusiastically pitched Africa’s prospects to a room full of company chairpersons. “In this changeable and complex international business world, Africa is the highlight of the global economy,” Lu beamed. The audience was similarly eager to discuss the investment prospects in pyrethrum farming (a plant with properties of an insecticide), a new chemical factory, and a power plant for a new city around Lamu, a small island on Kenya’s eastern coast.
The recent deluge of forbidding predictions and statistics about China’s Africa play fails to consider the motivations and aspirations of the many young Chinese entrepreneurs, adventurers, writers, and wanders across the African continent. One young woman, tired of parental pressure, decided to travel to Kenya to give freelance journalism a shot; a Chinese entrepreneur started up his own Nairobi-based tech firm, spinning off of a massive state-owned corporation; and a PhD student from prestigious Tsinghua University in Beijing, who has learned to speak English with a thick Nigerian accent, spent last year geo-coding urbanization data gathered in African cities. These people did not come to Africa seeking natural resources. In fact, should a slowing Chinese economy limit the domestic aspirations of young people like them, they may venture out to Africa in even greater numbers.
None of these findings diminish the tremors that China’s decelerating economy and falling demand for natural resources is causing throughout Africa. Beyond the direct impact of specific events such as the closure of a Chinese-owned mine that previously employed 3,000 people in rural Tanzania, the slowing growth of commodity-exporting countries may mean fewer job opportunities for increasingly young populations — 43 percent of the sub-Saharan African population is less than 15 years old, a proportion that is only rising — and less revenue to fund critical infrastructure. The plunging rand has diminished South African purchasing power and could lead to food insecurity.
Nonetheless, the patchwork of experiences among Chinese nationals seeking material and immaterial well-being across the continent continues to defy simple, statistics-driven narratives. As many analysts have written, China may be sneezing, and Africa may be catching a cold. But while this has led some people of Chinese origin to depart, leaving only rusting machines in their wake, countless others are just getting started.